Talvivaaran Kaivososakeyhtiö Oyj - Company Announcement

Talvivaara Mining Company Plc: Operational update

Stock Exchange Release

Talvivaara Mining Company Plc

3 July 2012



                               Operational update

     Steady progress in production after re-start of metals plant in April



Highlights
  * Nickel production of 3,194t and zinc production of 6,686t in Q2 2012
  * Output impacted by dilution of leach solutions due to rapid spring flooding
    and excessive rain and scheduled maintenance and previously announced
    fatality related stoppage in April
  * New CEO Harri Natunen conducted operational review and will adopt a more
    sustainable production approach during ramp-up aimed at improving the
    efficiency and reliability of the operations and minimising environmental
    impact
  * Metals recovery plant in continuous and stable operation with close to 100%
    availability since late April
  * Substantial production increase from 2011 expected but 2012 guidance
    unlikely to be achieved. Guidance anticipated to be updated with Q2/2012
    interim results on 16 August 2012

Production update
The  second quarter production output of 3,194t of nickel and 6,686t of zinc was
impacted  by dilution  of leach  solutions due  to spring flooding and excessive
rain, and a scheduled maintenance and a regrettable fatality related stoppage in
April.
After the re-start in late April, the metals plant has operated continuously and
steadily, producing 1,477t of nickel in May and 1,519t in June. The average flow
rate  of metal  containing leach  solution to  the plant  reached a  new monthly
record  of  1,318 m(3)/h  in  June,  and  the  availability  of  the  plant  was
effectively 100%.
Nickel  output  in  April  only  amounted  to  198t with production at the plant
restricted  for most of the month due  to the stoppage and subsequent changes to
certain  operating  procedures,  the  implementation  of which slowed down early
ramp-up  after the re-start. The production  stoppage that followed the fatality
at  the plant  in March  continued through  the early  part of  April whilst the
occupational  safety related  clarifications and  improvements requested  by the
Finnish Safety and Chemicals Agency were completed. Simultaneously the scheduled
maintenance  was brought  forward from  May to  April in  order to  minimise the
overall stoppage time.
Throughout  the second quarter, metals production  was affected by flooding that
followed  the rapid melting  of snow and  the unusually heavy  rainfall that has
amounted  to over 190mm during the spring in comparison to the long term average
of  approximately 100mm. The excess  water in circulation  has diluted the leach
solutions  such that the average  nickel grade in solution  pumped to the metals
plant  was 1.8 g/l  in the  second quarter.  The Company  estimates the dilutive
effect  of the recent  rainfall having been  around 25-30% compared to the long-
term  average water  balance in  the process.  The water  balance is expected to
return  to more normalised  levels during the  summer months, aided by increased
evaporation  and reduction of raw water  intake for the metals recovery process.
The  Company is  also implementing  measures to  prevent rainy seasons impacting
production in the future. These include e.g. additional reverse osmosis capacity
beyond  the  level  announced  on  24 April  2012, which  enables the Company to
further  increase recycling of  purified process waters  and to reduce raw water
intake.
Elsewhere  in the  process, mining  and materials  handling continued to operate
steadily  at  comparable  levels  to  those  achieved in the first quarter. With
reclaiming  of the primary heap continuously improving and thereby eliminating a
bottle-neck  from materials handling, the ore production volumes are expected to
grow  during the second half of the  year. As mining and materials handling have
progressed  reasonably well during the first  half of 2012 while metals recovery
has had lower availability, the nickel inventory under leaching in the heaps has
continued  to grow, providing  additional flexibility for  increasing the metals
production rates in the coming months.  Operational review
CEO  Harri  Natunen  joined  in  mid-March  and  has  since conducted a detailed
operational  review. Going  forward the  Company will  adopt a  more sustainable
production  approach during  ramp-up aimed  at improving  the efficiency and the
reliability  of the operations. In practice this means implementing a relatively
moderate rate of production increase in order to keep all processes operating in
a  stable manner such that good product quality can be maintained, environmental
discharges  can  be  minimised,  and  occupational  safety  can  be continuously
improved.
In  addition to previously announced management  changes on 11 May 2012, two new
task  forces have been established to further develop the key processes of water
management   and   bioheapleaching.   Both  task  forces  are  headed  by  Lassi
Lammassaari, Vice President of Strategic Projects.
Production guidance
The combination of the dilution effect of the excessive water in circulation and
a more sustainable production approach during ramp-up means that the Company can
no  longer be confident of achieving  the previous guidance of 25,000-30,000t of
nickel in 2012.
However,   the  Company  continues  to  evaluate  opportunities  for  production
increases in the near term and anticipates that it will be in a position to give
updated guidance for the current year at the interim results on 16 August 2012.
The  Company remains confident that a  substantial production increase over last
year's  output  of  16,087t of  nickel  can  be  delivered  and  anticipates the
annualised  production rate to  sustainably reach more  than 25,000tpa of nickel
during the remainder of the year.
Financial update
Talvivaara's  financial result  for the  second quarter  will be impacted by the
weak nickel price that has recently traded in the range of USD 16,000-17,000/t.
The  net sales for the period will  also be affected by nickel product inventory
build-up at the mine site due to an annual maintenance stoppage at the Company's
off-taker Norilsk Nickel Harjavalta. The inventory build-up is anticipated to be
fully recovered during the third quarter.
Harri  Natunen, Talvivaara's  CEO commented:  "After joining  Talvivaara in mid-
March,  I have  had the  pleasure of  getting to  know and  working with  a very
talented  and motivated team. The management team has also been strengthened and
restructured  during the  spring, and  together we  have set  out to establish a
sustainable  ramp-up track that secures  safe, efficient and reliable production
with minimised environmental impact.
I am confident that all the prerequisites for successful completion of the ramp-
up are in place. Whilst all production processes still need some improvement, we
have  seen evidence that the stability  of production has improved significantly
and I don't see any reason why this trend would not continue.
The  improving reliability  of operations  helps us  in achieving operating cost
savings  and,  importantly,  also  minimises  our  environmental footprint. I am
particularly  happy to note that  the month of May  was the first month since we
went  into production  when no  complaints about  hydrogen sulphide  odours were
recorded  from the  local residents;  this is  a record  that we look forward to
maintaining.
Despite  concluding  that  we  are  unlikely  to  achieve  our previously stated
production  guidance for the year,  we continue anticipating substantial ramp-up
over  last year's nickel output and  also expect to sustainably reach annualised
production rates of over 25,000tpa of nickel during the latter half of the year.
Over  the summer,  we will  focus on  recovering from  the water  balance issues
caused  by the wettest spring  recorded since 1983 in the  Kainuu region, and we
also  continue  evaluating  our  production  outlook  in  more  detail  with the
intention  of re-establishing production guidance for 2012 in August at the time
of our second quarter results."


ENQUIRIES

Talvivaara Mining Company Plc Tel: +358 20 712 9800
Harri Natunen, CEO
Saila Miettinen-Lähde, Deputy CEO and CFO

Merlin PR Tel: +44 207 726 8400
David Simonson
Anca Spiridon


Talvivaara Mining Company Plc
Talvivaara Mining Company is an internationally significant base metals producer
with its primary focus on nickel and zinc using a technology known as
bioheapleaching to extract metals out of ore. Bioheapleaching makes extraction
of metals from low grade ore economically viable. The Talvivaara deposits
comprise one of the largest known sulphide nickel resources in Europe. The ore
body is estimated to support anticipated production for several decades.
Talvivaara has secured a 10-year off-take agreement for 100 per cent of its main
output of nickel and cobalt to Norilsk Nickel and entered into a long-term zinc
streaming agreement with Nyrstar NV. Talvivaara is listed on the London Stock
Exchange Main Market and NASDAQ OMX Helsinki and is included in the FTSE 250
Index. Further information can be found at www.talvivaara.com.


[HUG#1623678]

Attachments:

Talvivaara Operational update 3.7.2012.pdf